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Can BlackRock’s Big Green Makeover Satisfy Critics?

BlackRock is a regular target of environment and social protests around the world. Can a green ... [+] makeover change its image?

Getty Images

The world’s largest investment management firm, BlackRock, today formally announced that it will restructure its business around sustainability, acknowledging that man-made climate change requires a transformation of the global investment market.

The firm, which has almost $7 trillion in assets under management, said it would double its offering of sustainability-focused exchange traded funds to 150, and offer “sustainable versions” of its major portfolios.

The announcement comes as BlackRock faces a growing number of global protests against its investment practices. Last week’s storming of the firm’s Paris offices by protesters railing at French President Emmanuel Macron’s changes to the country’s pensions system underline how the company has become an easy target for those disaffected by the status quo. Last year, climate activists held high-profile demonstrations at BlackRock offices in Europe and the U.S., taking the company to task for its climate record.

Larry Fink, chairman and CEO of BlackRock, will be hoping his announcement can resurrect the firm's ... [+] image in the eyes of climate-conscious investors.

AFP via Getty Images

BlackRock’s new plan appears to be an attempt to burnish its arguably grubby image. In an open letter introducing the change in strategy, BlackRock’s chairman and CEO Larry Fink stated that “climate risk is investment risk.”

“Indeed,” Fink said, “climate change is almost invariably the top issue that clients around the world raise with BlackRock. From Europe to Australia, South America to China, Florida to Oregon, investors are asking how they should modify their portfolios.”

He went on, “In the near future—and sooner than most anticipate—there will be a significant reallocation of capital.”

BlackRock said it would remove from its portfolios companies that obtain more than 25% of their revenues from thermal coal production—that is to say, the business of burning coal to generate electricity. Elsewhere, the company would be strengthening its analysis of environmental, social and governance (ESG) risk, with new tools to analyze physical climate risk. Just a few days ago, BlackRock announced it would be joining Climate Action 100+, a global alliance of more than 370 investors controlling over $35 trillion in assets, focused on curbing emissions and improving sustainability-related financial disclosures.

But the firm has a lot of ground to make up with environmentally conscious investors. BlackRock has in the past been accused of “greenwashing,” allegedly attempting to convey a false impression of how environmentally sound its practices really are. In August 2019 Friends of the Earth named BlackRock as the largest investor in deforestation, and in 2018 it was the world’s most significant investor in new coal plants.

As well as its historically less-than-green portfolios, research has suggested BlackRock tends to side against sustainability proposals: a 2018 study by the 50/50 Climate Project found the firm supported just 23% of climate-related proposals, and that its investors “remain in the dark as to whether or how BlackRock’s engagement strategy is actually changing corporate behavior.”

This being the case, today’s announcements may not be enough to assuage the concerns of all investors, let alone frontline protesters. But among the positive takeaways from the development, it is clear that climate activists—whether they are on the street or in the boardroom—have made themselves heard.

I have spent much of the past 20 years as a journalist in Asia, where I found the collision between humanity and the natural environment to be increasingly stark and the

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I have spent much of the past 20 years as a journalist in Asia, where I found the collision between humanity and the natural environment to be increasingly stark and the impacts of climate change ever more immediate. Now back in Europe, I am principally concerned with renewable energy and the urgent need to develop large-scale systems for reducing our collective carbon footprint.